While M&A deals can bring value to a company’s assets, they can also expose the company to significant risk. Companies that fail in M&A transactions to safeguard data could face expensive fines and also lose trust in digital technology. The good part is that a well-planned and implemented privacy due diligence process can reduce these risks.
Therefore, many M&As include a lot of sensitive information that could be impacted by regulatory issues and legal issues. This is particularly true in the case of M&As that involve highly-regulated sectors, such as healthcare and finance. In these instances, parties could be required to conduct a separate examination webdataroomcenter.net/an-efficient-board-meeting-agenda-template-for-nonprofits of regulatory compliance during the due diligence process.
The data of the target may be subject to regulations specific to the sector like the Gramm-Leach-Bliley Act or the Health Insurance Portability and Accountability Act or even general consumer privacy laws, such as the California Consumer Privacy Act, the buyer must be aware of the degree of compliance and risk in the transaction prior to closing. It is essential to speak with the personnel of the target company who are accountable for privacy and data security to obtain a clear understanding of their current status, which includes the policies and procedures that could pose a problem in a M&A scenario.
It is important to include in the contract of sale forward-looking clauses that require the sellers improve their data protection practices prior to closing. This will not only aid in ensuring compliance with applicable laws and regulations, but it’s also an effective way to cut down on liabilities after closing and reduce the impact of M&A activities on the possibility of data breaches in the future.